Thinking of expanding your business to other countries? Many others have gone before you. Companies have been expanding globally for decades, with varying degrees of success. It's not for every company. Is it right for yours? Do your due diligence before making that decision by asking for help from those who know the pros and cons of doing business in a foreign country.
The word global literally means worldwide, or all over the world. So, you'd think a global company must do business all over the world. But realistically, few, if any, companies could be said to do business with every single country in the world. A global company is one that does business in at least one country outside of its country of origin. Even expanding to one other country is a huge undertaking. It's not as if someone wants to order some of your products and you ship them out to France or Bolivia or wherever and – BOOM! – you're instantly a global company.
Becoming a global company means introducing your products and your company to the people of that country. It takes a great deal of research to determine which country to begin with and how to do the introductions. It means sending employees to the country to see it firsthand, talk with some of the people there and then decide if there's a good fit. Of course, once a company decides to go global and has success in one country, it naturally tries expanding to another country, so global companies often have a presence in several countries.
Although using the term global in reference to business began in recent years, doing business globally isn't new. One example is that of Coca-Cola, which was a fledgling startup in 1886. By the time of World War II, the 50-year-old company had managed to keep its item price to 5 cents, believing that everyone should be able to enjoy the treat. The company decided to provide its popular drink to U.S. soldiers wherever they were stationed, still at just 5 cents.
Today, people in over 200 countries enjoy not only Coke and its other regular and diet soft drinks, like Sprite and Fanta, but over 3,800 products ranging from bottled water and iced teas to juices, vitamin-enriched and soy-based beverages. A major reason for Coca-Cola's success has been its strategy of looking at each market individually and providing beverages that fit with the local culture and tastes. Sometimes that means creating new products for a market or tweaking a beverage to be more in line with what people in that country are known to enjoy.
Some other companies that are now global include hospitality corporations Hyatt and Hilton Hotels, information technology leaders Cisco and Adobe, manufacturers Monsanto and 3M and financial services company American Express. Oh, and an internet search company you may have heard of called Google. What unites these very different institutions is that all have made Fortune's October 2016 list of the 25 Best Global Companies to Work For. Employees cited how their company makes them feel valued, cares about their personal and professional development, keeps open lines of communication all the way to the CEO and encourages them to keep a good balance of work and family time.
Clearly, not only is it possible to expand globally with a great deal of success, but it's also possible to do so without sacrificing the well-being of the employees that help you get there in the first place. In the long run, making your company a great place to work – the word fun was even mentioned many times – is a way to keep good employees that help you expand and grow globally without the pain of internal friction and high staff turnover.
It's important to remember that these companies, though huge today with a presence in numerous countries, all began as small startups. Coca-Cola had its humble beginning at one drugstore in downtown Atlanta, Georgia. Google started out as the research project of two Stanford grad students, Sergey Brin and Larry Page. The key to successfully becoming a global company is to take it slow, one country at a time.
The U.S. Small Business Administration reports that 96 percent of the world's consumers live outside of the U.S. The obvious benefit to expanding globally is to increase sales and profits by reaching out. There are a number of other benefits, however, to having a presence in countries outside of the U.S.:
Increase customer base. Selling in another country vastly increases your customer base. If the U.S. market is saturated with products like yours, and research shows that's not the case in the country you've chosen to expand into, you have an untapped potential customer base available to you. While your product may have become familiar to U.S. customers, it's brand new to those in a foreign country.
Lower operating costs. If labor and/or manufacturing costs are cheaper in the new country, you stand to save on operating costs. That can make a huge difference to your bottom line.
Take advantage of the difference in seasons. In situations where your product is seasonal or even somewhat seasonal, meaning sales are steady year-round and then surge during one season, expanding in countries where the seasons are opposite to the U.S. allows you to experience high sales levels throughout the year.
Control product introductions. Remember, too, that you don't have to provide your entire product line in the new country. You can begin with just seasonal products, announcing your presence with a big advertising splash. After the season ends, introduce other products one by one, creating media buzz each time you bring another product to the market. Since this market doesn't know the extent of your product line, you can sell only the products that make the most sense in that market.
Continue your company's high growth rate. If your company had been growing rapidly, but growth has stalled in the U.S., you can get back on track by expanding to another country.
Create new jobs. When you enter the market in a foreign country, you need employees or agents who can represent your company. Whether you have offices or manufacturing facilities there or just representatives, you’re creating work opportunities in that country. This helps that country’s economy and makes your company attractive.
Expanding to another country won't be all sunshine and roses. That's why it's vital to fully research any country you're considering in order to minimize unwelcome surprises:
Different regulations and technologies. Just as states in the U.S. have different regulations for doing business, other countries have different employment and tax laws that you'll need to understand in advance. Don't risk being surprised by these after you've committed to the expansion.
Infrastructure issues. Many countries do not have the reliable internet and cellphone services that the U.S. has. Particularly in developing countries, such as some in Africa, communication services are spotty or nonexistent. Whether you're planning to open offices or a manufacturing facility in a country, or have agents there who represent you, be sure to verify that anywhere you're considering expanding into has internet and cellphone communication. You'll need them to put up a website, post on social media and communicate with your representatives in that country. Even travel in other countries can be problematic due to poor roads, traffic or other factors. Think of some of the older areas in European countries that have only narrow, winding streets and few places to park. They look charming, but could be a nightmare for your employees or distributors to do business.
Parlez-vous Francais? Don't assume you'll be doing business in English. Although you'll find some English speakers, many people did not learn English in school and they conduct business fully in their native languages. Make sure the software you use to run your business, from sending emails to promoting on social media, support the country's language. The moment you decide on the country, begin a rapid language learning program for you and others who will be working with you on the expansion.
You’re not in Kansas anymore. Like Dorothy in "The Wizard of Oz," you can feel as if you’ve landed in a bizarre place indeed because you don’t understand the culture. For example, something as simple as leaving the chopsticks upright in your rice bowl can be seen as rude in China. Using humor in a business discussion in Germany could nix the whole deal. And never say "no" during discussions in India. Opt for "we'll see" or "I will try" instead. Ask the SBA or people you know who have a presence in the country what the differences are between how U.S. companies do business compared with the country you’re considering.
When Coca-Cola began its expansion into foreign markets, it undertook extensive research about the country and its people, including their likes and dislikes as a group. As a result, the company came away with a good understanding of which products would be likely to sell well in that country, and which would not, as well as how to interact with the locals according to their customs.
Research, research, research. You cannot do too much research before going global. Which country should you start with? What have others experienced when they started their global expansion? Contact the SBA and devour all information they have for you. The SBA has arrangements with many schools to provide help to businesses in their area. Contact area universities for help. Many times, interns will help with the research so you don't have to do it all.
Establish a local team in the country. Once you've chosen the country you want to expand into, find locals to help you do this. They know their country and often make a business of helping foreigners get established. Then, be sure to listen to the information and feedback the local team gives you. This may seem obvious, but it's one of the biggest mistakes companies make when going global – they hire the local team, but discount the suggestions the team gives.
"One of the most disappointing mistakes that I’ve seen companies make is that they hire highly competent, intelligent local people to serve their overseas markets, but then fail to consider their input when making strategic decisions," wrote business consultant Nataly Kelly in the Harvard Business Review. Company executives would ask her opinion, she said, instead of listening to the local team.
Maybe the advice seems contrary to what you've learned about business. That's why other countries are called foreign. Their practices can seem strange to someone who has only done business in the U.S. You hired the local team for a good reason, so take their ideas seriously.
Take it slow. It's human nature to want to act on an idea once you have it in mind. Think about how long it took you to get your business to where it is today. Now you're considering going into a foreign environment and putting your hard-earned profits on the line. Give it the time it takes to thoroughly research, seek advice from others who have expanded and from organizations that are designed to help businesses go global, and get the right local team in place.
Follow the 1-2-3 plan. The SBA makes it simple with its three-step plan:
- Get counseling.
- Find buyers.
- Get funding.
But within each step, they offer a multitude of ways they can help. Start with the SBA's website section Growing Your Business (exporting tab) and reach out to them for the help you need. They'll put you in touch with the right people and before you know it, you could be saying hola, bonjour or kon'ichiwa to a whole market full of new customers who want to buy your products.